2023 (4) TMI 537 - HC - Income Tax

Application for settlement of cases - Validity of order passed by the Settlement Commission u/s 245D(4) - Jurisdictional powers of Settlement Commission as delineated in Section 245BA - HELD THAT - Settlement Commission found that there was no basis for estimation and quantification of undisclosed income by the department. Settlement Commission found that a sum of Rs.2,00,00,000.00 comprising of Rs.50,00,000.00 offered in the return filed under Section 153A, Rs.1,13,70,000.00 in the settlement application as well as a further sum of Rs.36,30,000.00 offered in the course of hearing would meet the ends of justice. The same was accepted and the issue was settled. No procedural or substantive error or infirmity in the approach of the Settlement Commission. Settlement Commission had followed the laid down procedure contemplated under Chapter XIX-A of the Act as well as under the Rules. Principles of natural justice were duly complied with. There is no allegation of any fraud or misrepresentation. In the absence thereof, we are afraid we cannot reopen a concluded settlement in a proceeding under Article 226 of the Constitution of India like an appellate authority. No merit in the writ petition.

Issues Involved:
1. Legality and validity of the order passed by the Income Tax Settlement Commission.
2. Maintainability of the application for settlement filed by the assessee.
3. Procedural compliance by the Settlement Commission.
4. Scope of judicial review of the Settlement Commission's order.

Issue-wise Detailed Analysis:

1. Legality and Validity of the Order Passed by the Income Tax Settlement Commission:
The Commissioner of Income Tax (Central), Basheerbagh, Hyderabad, challenged the legality and validity of the order dated 18.03.2008 passed by the Income Tax Settlement Commission, Additional Bench, Chennai, in Settlement Application No.AP/HD51/06-07/18/IT. The petitioner contended that the Settlement Commission mechanically accepted the application of respondent No.2 and overlooked the objections raised under Rule 6 and the report under Rule 9 of the Income Tax Settlement Commission (Proceedings) Rules, 1986. The petitioner argued that there was no additional disclosure of concealed income by respondent No.2 in the application for settlement, and the income detected during the search and seizure was merely mentioned in the application.

2. Maintainability of the Application for Settlement Filed by the Assessee:
Respondent No.2, an assessee under the Income Tax Act, 1961, engaged in civil construction, filed returns of income for the assessment years 1999-2000 to 2005-2006 following a search and seizure operation. During the pendency of the assessment proceeding, respondent No.2 filed an application before the Settlement Commission under Section 245C of the Act, disclosing additional income over and above what was declared under Section 153A in the returns of income. The petitioner objected to the maintainability of this application, arguing that the conditions for settlement under Section 245C were not met.

3. Procedural Compliance by the Settlement Commission:
The Settlement Commission admitted the application of respondent No.2 and directed the petitioner to submit a report under Rule 9, which was duly complied with. The Commission accepted the additional income offered by respondent No.2 at Rs.44,96,300.00 and directed the issuance of a demand notice for the payment of income tax. The Settlement Commission granted immunity to respondent No.2 from prosecution and penalty under the Act. The High Court noted that the Settlement Commission followed the laid down procedure under Chapter XIX-A of the Act and the Rules, and principles of natural justice were duly complied with.

4. Scope of Judicial Review of the Settlement Commission's Order:
The High Court discussed the limited scope of judicial review in cases involving orders of the Settlement Commission. Citing the Supreme Court's decision in Jyotendrasinhji v. S.I.Tripathi (AIR 1993 SC 1991), the Court emphasized that judicial review is concerned with procedural irregularity or violation of natural justice principles, bias, fraud, and malice. The Court observed that the Settlement Commission had followed the procedure and there was no allegation of fraud or misrepresentation. The High Court concluded that it could not reopen a concluded settlement in a proceeding under Article 226 of the Constitution of India like an appellate authority.

Conclusion:
The High Court dismissed the writ petition, finding no merit in the challenge against the Settlement Commission's order. The Court held that the Settlement Commission had acted in accordance with the provisions of the Act and the Rules, and there was no procedural or substantive error in its approach. The miscellaneous applications pending were closed, and no order as to costs was made.

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